TSB Banking Group Plc surged 12 percent on its first day of trading as Lloyds Banking Group Plc (LLOY) sold a 35 percent stake in the lender, more than initially planned, in an initial public offering.
TSB shares, which were priced at 260 pence in the IPO, closed up 30 pence higher at 290 pence in London, valuing the London-based lender at 1.45 billion pounds ($2.5 billion).
“It was priced to go and in this case they’re going,” Gary Greenwood, analyst at Shore Capital said by telephone. “The company wanted to make sure it got the initial tranche away.”
The offering priced TSB at 1.3 billion pounds, less than its 1.5 billion-pound book value. Lloyds has to sell TSB to satisfy regulators after receiving a government bailout of more than 20 billion pounds during the financial crisis. The IPO is the biggest by one of the so-called challenger banks seeking to compete with Britain’s four biggest lenders.
“The successful initial public offering of TSB is an important further step for Lloyds Banking Group as we act to meet our commitments to the European Commission,” Lloyds Chief Executive Officer Antonio Horta-Osorio said in the statement.
Lloyds, the U.K.’s biggest mortgage lender, is selling 175 million TSB shares, or 35 percent of the company, raising 455 million pounds. That’s more than the 25 percent originally planned, “due to significant investor demand,” Lloyds said in a statement today.
London-based TSB, led by CEO Paul Pester, has about 4.2 percent of the U.K. checking account market and 631 branches.
The IPO price was in the top half of the 220 pence to 290 pence range that Lloyds announced June 9. Citigroup Inc., JPMorgan Chase & Co. and UBS AG managed the sale. Lloyds said individual investors are buying about 30 percent of the shares.
Lloyds, 25 percent owned by the British taxpayer, has until the end of 2015 to dispose of TSB. U.K. regulators and politicians are seeking to increase competition in Britain’s consumer-banking market, which is dominated by Lloyds, Royal Bank of Scotland Group Plc, Barclays Plc (BARC) and HSBC Holdings Plc. (HSBA)
Lloyds was down 0.9 percent to 76.7 pence, giving the company a market value of 55 billion pounds.
IPOs in London have raised about $18 billion this year, the most since the first half of 2011, and have posted average gains of about 3 percent, compared with a 1 percent increase in the FTSE 100 Index over the same period.
B&M European Value Retail S.A., a U.K. discount retailer, also began trading this month after raising about $1.8 billion, in the largest IPO in the U.K. this year, according to data compiled by Bloomberg.
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